Wipro shares soared more than 5% on early Friday following an announcement by the company of its FY25 second quarter earnings and bonus shares.
Stocks rose up to 5.34% on BSE and reached Rs557.05 due to strong revenues performance as well as the announcement of a 1:1 bonus share.
Investor confidence boosted by Q2FY25 results
Wipro is India’s 4th largest software exporter. It reported an IT service revenue of Rs22196 crores for the third quarter that ended in September. This represents a sequential growth of 1.4% compared to Rs21896.3 crores the previous quarter.
The company reported revenue in dollars of $2.660 billion, an increase of 1.3% compared to $2.625.9 millions for Q1FY25.
Wipro’s large-deal bookings grew by 28.8% in a single quarter, to $1.5 billion. This indicates robust demand, despite the macroeconomic downturn.
In the third quarter, the company’s EBIT for IT services increased by 3.5 percent to Rs 3,732 crore. The EBIT margin improved by 30 basis point to 16.8% from 16 % in the prior quarter.
Wipro gave cautious guidance for the Q3FY25 despite its upbeat report.
In constant-currency terms, the company predicted IT services revenues in the $2,607 to $2,660 billion range, which translates to a decline in revenue of 2.0% in a single quarter, or essentially flat growth. This is due to weak seasonal trends.
Market optimism fuelled by bonus share issue
Wipro’s Board announced that it would issue a bonus of 1:1, which means shareholders will get one extra share per share they hold.
Wipro’s bonus issuing strategy is to reward and enhance the value of shareholders.
Wipro’s shares traded 4.39% higher on Friday morning at 10:45am on BSE. This reflects the positive sentiment of the market following the announcement.
Analysts comment on the Q2 outlook and results
Nomura has praised Wipro for its performance. The company exceeded expectations in key metrics.
Nomura noted that Wipro’s conservative Q3 guidance is due to seasonal issues, despite the strong momentum in large deals.
The brokerage maintained its “Buy” rating for Wipro with a price target of Rs680.
Antique Stock Broking, on the other hand, took a more moderate view. They acknowledged Wipro’s positive performance in Q2, but expressed concern over its underperformance compared to competitors like Infosys, HCL Technologies, and others.
The brokerage noted that Wipro has struggled with a steeper-than-expected decline in consulting and discretionary spending over the past few quarters.
Antique has maintained its “Hold” rating for Wipro’s shares and the target price at Rs575 per Share.
It also lowered its estimates for EPS by between 2% and 3%.
Seasonal trends temper the outlook
Analysts remain cautious in the short-term despite Wipro’s stable margins and large deals.
Forecasts for the quarter ending December indicate a muted level of growth. Seasonal weakness and wage increases are expected to have a negative impact on profitability.
Wipro’s stock price will depend on the way it navigates through these challenges. This is especially true as Wipro aims to maintain margins in spite of wage pressures.
The post Wipro Shares Jump 5% On Q2 Earnings and Bonus Share Announcement may be updated as new developments unfold.
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